Esprit posts loss of HK$238 million, with currency risks highlighted
Retailer’s sales turnover falls 13 per cent to HK$9.31 billion
Retailer Esprit unveiled a plan to downsize its footprint as it announced a HK$238 million loss for the second half of last year.
“In the very short term, we will continue to see the closure of unprofitable spaces from our retail store network and our wholesale partners’ points of sale,” the company said in its interim results announcement on Tuesday.
“We aim to offset the loss of selling areas with improvements in productivity and the group turnover may remain stable, or even be reduced.”
During the six-month period, the company posted a 13 per cent decline in sales turnover to HK$9.31 billion and a net loss of HK$238 million, partly due to the unfavourable currency impact resulting from depreciation of the euro against the Hong Kong dollar.
The loss per share was 12 HK cents and directors did not declare an interim dividend.
The company said expansion would not be a top priority until it reached a sustainable level of sales productivity and business profitability.
The company said it saw positive retail sales growth via both online and offline channels, particularly in Europe, which reflected improved product performance, as well as improved marketing and channel operations. But it faced challenges in its wholesale business, currency risks and underperformance in Asian markets.
The underperformance in the Asia-Pacific region was partly attributable to a combination of volatility in the financial markets, the economic slowdown in China and the devaluation of the yuan, which significantly dampened consumer sentiment and reduced tourist flows in the region, the company said.
Most of the group’s business is located in Europe and the Asia-Pacific region.
The group’s largest geographic market, Germany, recorded turnover of HK$4.44 billion, representing year-on-year growth of 1.5 per cent in local currency.
The rest of Europe reported a turnover of HK$3.38 billion, down from HK$3.92 billion in the second half of 2014.
Turnover in the Asia-Pacific amounted to HK$1.42 billion, representing a year-on-year drop of 6 per cent in local currency.
Looking ahead, Esprit said the operating environment appeared challenging as volatility in financial markets and economic uncertainty could significantly dampen consumer sentiment, especially in Asian markets.
If the weakness in the euro persisted it would put some pressure on the group’s gross profit margin, it said. However, the company anticipated that a higher contribution from retail turnover would provide support to its gross profit margin and help mitigate the negative impact.